Building Strong Account Management
By Mark Dancer and Marc Wallace, Hay Group
This article is based on a workshop presentation delivered at the WorldatWork 2011 Spotlight on Sales Compensation in Chicago.
Companies seeking closer and more consultative relationships with customers — rather than just viewing customers as a simple transaction — need to have strong account management skills. These skills are critical so account managers can move beyond being “hunters” and help the company build its value proposition with customers.
In this article, we discuss how to manage, develop and pay account managers, focusing on trends in compensation and organizational structure.
The Account Manager Role
In most industries, organizations are building more consultative business-to-business relationships. In essence, this requires:
Showing customers how you will help them
Showing customers proof of the impact
Sticking around to become a trusted advisor.
This means that the account manager role will grow in terms of complexity and impact. When assessing sales roles, we typically look at two continua: transactional/consultative and farmer/hunter (see Figure 1: Sales Role Matrix). The intersection of the two defines four roles: familiar friend; trusted advisor; deal maker; and field representative.
Figure 1: Sales Role Matrix
Source: HayGroup
There are many factors that deliver a value proposition to the client. The proposition can be a function of price, channel, benefits and so on. As you move to the right on the continua, toward a more consultative sale, the value proposition is more dependent on the account manager. As a result, the trusted advisor role typifies large account management roles.
Moving into larger account manager roles carries risk for both the company and the individual. For the company, it is placing more of its competitive advantage into the (hopefully) capable hands of its account managers. In essence, there is a loss of control. For individuals, they are being asked to engage in significantly different behaviors.
To see how these risks can play out, consider one organization that took its best sales representatives and turned them into account managers. It replaced the commission with objectives and let them loose. The revised incentive plan failed. It failed because there is much more to building strong account management than the incentive plan. In fact, the incentive plan is one small, final block.
Managing, Developing and Paying Account Managers Strong account managers have to move from up-sell to up-serve. This means building the right organization to ensure account manager success:
Create a compelling vision of how you go to market.
Establish and measure competencies (behaviors) that will reinforce account management success.
Focus on hiring and retaining talent. This perhaps seems like a no-brainer, but the reality is that account managers are looking for commercial success, satisfaction and growth. They are not coin operated.
Practice and coach for performance. Highly commissioned sales representatives are typically managed by the incentive plan. If they do not do well, they are not paid well, and so they leave. Not so with account management. Account managers have significant nonselling activities such as planning, getting more contacts, developing communication that is of value to clients and so on. It is more than developing a pipeline of opportunities and closing the deal. As a result, account managers need a plan, and that plan has to be managed. A tighter focus on the numbers and the strategy is required.
Pay for performance. Link to end-result performance as opposed to identifying measures that are perhaps closer to account managers but not necessarily indicative of overall performance.
Note that trusted advisor roles typically need to develop competencies such as business acumen, relationship building and conceptual thinking. This is very different from competencies typically seen in successful sales reps: achievement orientation and analytical thinking. In order to develop strong account managers, performance management and recruiting need to reflect these aspects. Your strongest sales representative will not be your strongest account manager.
When it comes to pay, commission plans and other highly leveraged plans reward roles that spend the majority of time on opportunities and closing sales. Because account managers are customer facing, a common mistake is to assume that a highly leveraged sales incentive plan is appropriate. Incentives do play a significant role in developing account managers, but they have to be appropriately designed. Hay Group research has shown that the assumption that account managers should be paid in a manner similar to other sales positions can be a disincentive for them. By its nature, account management focuses on both selling and nonselling activities.
Typical account management plans have the same components:
Goal-based measures such as 5% growth or gross profit of $X from each account (versus a commission)
Three measures or fewer
A focus on margin or operating profit
A lucrative but capped approach. There is a maximum payout that would place the account manager above labor market benchmarks.
It is also important to take market practice into consideration, but do not let it drive the design of the incentive plan. Hay Group research shows that there is significant variability in the design of account manager incentive plans, reflecting a realization in the market that best practices are not necessarily the cornerstone of incentive design. Rewarding for performance should be the core of the incentive plan, versus identifying the most direct impact of the account manager or market practices.
Conclusion
The key to building effective account managers is to go beyond what you would do for more transactional sales roles. Instead of focusing only on incentives, also consider the performance management process so you can build the right behaviors as well as pay for performance. Otherwise, you could end up with skewed incentive payouts, turnover and lack of growth instead of profitable, strategic growth. There is a lot of power in the account manager role — it is time to get it right.
About the Authors Mark Dancer, senior principal at Hay Group in Chicago, leads the Sales Effectiveness practice. He can be reached at mark.dancer@haygroup.com. Marc Wallace, vice president at Hay Group in Chicago, leads the Sales Compensation practice. He can be reached at marc.wallace@haygroup.com.
